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There is a growing number of failed SAP public sector deployments, ranging in scope from the Los Angeles Unified School District (LAUSD) megadeal to the smaller Burnaby, B.C. project. Now the city of Portland, Oregon can be added to that list. A city analyst has revealed to the media that Portland’s SAP project, budgeted at $31 million in 2006 for a 2007 go-live date, is now estimated to be nearly $50 million and won’t be complete until 2009. Portland has fired its systems integrator, Ariston Technologies and Consulting, and is working directly with SAP services to get the system up and running.
It isn’t clear who’s to blame for the cost overrun and project delay, but Portland and Ariston will no doubt implicate each other in time. The soundness of the underlying SAP software itself has not been questioned by either party.
One of the interesting features of Portland’s SAP implementation is the claim, made in a budget document back in 2004, that:
“Users are aware of the many recent developments in ERP software that they feel would better serve their needs. Staff specifically cited on-line real time queries as a high priority as well as the ability to drill down or summarize data. Most said that the staff time spent compiling financial information from various sources in different formats outweighs the cost of a new system.”
While it’s impossible to argue over the merits of the business case without access to all the numbers, it seems highly unlikely that improved data reporting capabilities justify a $50 million expense (to say nothing of maintenance costs for years to come). Of course, there’s also the benefit of getting rid of Portland’s old legacy systems, but how expensive can these be? In the case of Washoe County, Nevada, another SAP ERP customer working with Ariston, 23 interfaces costing between $15,000 and $20,000 each were ditched after implementing SAP. Call it a half million in savings.
Granted, enterprise applications investments are not always about immediate hard cost savings. For many companies, the investment is strategic: for example, it enables them to remain competitive, keep pace with the data demands of their ecosystem, or achieve long-term efficiencies in front and/or back office processes. But the public sector is not the private sector. Portland isn’t in competition with other city governments, and its main job is to provide basic services that governments have successfully provided for thousands of years before the advent of software. It’s very easy to understand why blue-chip private companies such as Coca-Cola or Bank of America would go with SAP and related applications investments, because the investment allows them to do things they couldn’t even contemplate before (such as smart picking in Coca-Cola warehouses). It’s no so easy to understand why city governments are eagerly disbursing tens of millions of dollars for software for enterprise software.
There’s a reason it’s called enterprise software.
Demir Barlas, Site Editor